It seems that every day we read in the news about identity theft. The Washington Post reports that over 50 million accounts have been exposed to the possibility of identity fraud since the beginning of the year.
What is Identity Theft?
Identity theft occurs when a person uses your personal information, such as Social Security number and birth date, with the intent to commit fraud or to aid an unlawful activity. Once personal information is obtained, the person may open new credit cards and bank accounts, or take out a loan in your name. Federal law provides a $50 liability limit for the fraudulent use of credit cards and because of this, most identity theft victims never incur a high amount of direct monetary losses. However, restoring credit and correcting the information is a slow and time-consuming process.
12 STEPS TO REDUCE YOUR RISK
When it comes to identity theft, you can't entirely control whether you will become a victim, but there are certain steps you can take to minimize your risk:
1. Order a copy of your credit report.
2. Place passwords on your credit card, bank, and phone accounts.
3. Secure personal information in your home, especially if you have roommates, or employ outside help, or you are having work done in your home.
4. Ask about information security procedures in your workplace, as well as at businesses, doctor's offices, and other institutions that collect your personal information.
5. Don't give out personal information on the phone, through the mail, or on the Internet - unless you've initiated the contact, or you are sure you know with whom you're dealing.
6. Treat your mail and trash carefully. Shred it!
7. Don't carry your Social Security card; leave it in a secure place.
8. Give your Social Security number only when absolutely necessary, and ask to use other types of identifiers.
9. Carry only the identification information and the credit and debit cards that you'll actually need when you go out.
10. Be cautious when responding to promotions.
11. Keep your purse or wallet in a safe place at work; do the same with forms that include your personal information.
12. When ordering new checks, pick them up from the bank instead of having them mailed to your home mailbox.
Should you buy Identity Theft Insurance?
Some companies offer insurance or similar products that claim to give you protection against the costs associated with resolving an identity theft case. Typically, these policies cover the expenses associated with reclaiming your financial identity, ranging from long-distance phone calls to the cost of hiring an attorney.
There are three ways you can obtain identity theft insurance:
• Through homeowners or renters insurance: Some homeowners and renters policies cover identity theft losses of up $25,000 at no extra cost.
• As a stand-alone policy: Several major insurers allow customers to buy a separate identity theft policy costing anywhere from $50 to $200 a year.
• Through your credit card: Some credit card companies will provide member banks with ID theft insurance as an optional benefit for cardholders. Check with the financial institution that issues your card.
Do you need Identity Theft Insurance?
Critics say identity theft insurance is unnecessary because the crime rarely results in major financial losses. Others say a lowcost policy could prove worthwhile. The expenses covered vary among insurers, so review a policy carefully before signing up. This is a specialty type of insurance, and as with all specialty insurance, it's really important to know exactly what it is you're purchasing.
WHAT TO LOOK FOR IN IDENTITY THEFT INSURANCE:
• A low deductible. A policy with a high deductible may not be worth the cost because, according to the Identity Theft Resources Center, the average identity theft victim spends $808 on out-of-pocket expenses.
• Reimbursement for lost wages. The average identity theft victim spends over 150 hours straightening out the mess. Not all chores can be done at night and on weekends, and many identity theft victims have to take time off from work to visit government offices that are only open during business hours.
• Coverage of attorney fees. If you're sued because someone committed crimes in your name, you may need to hire a lawyer. This can cost thousands of dollars, so be sure your policy covers it.
• Cost of denied credit. Sometimes individuals don't realize they've been victimized by identity thieves until they're rejected for a loan. An insurance policy should cover the cost of reapplying for a loan, along with the cost of removing negative items from your credit report.
Be aware that most creditors will only deal with you to resolve problems; therefore, the insurance company may not be able to reduce that burden. Remember, you can't entirely control whether you will become a victim of identity theft, but you can take steps to minimize risk. Take extra measures by looking into different insurance options.
Steven A. Odell is the Chief Executive Officer of LyonsOdell. He can be contacted at 484.586.3902, or by email at LyonsOdellInfo@LyonsInsurance.com, or visit www.LyonsInsurance.com.
